In testimony before Congress today, the head of the Consumer Financial Protection Bureau said that despite new mortgage rules — home purchase lending is growing, as is the number of residential lenders and bank lenders. But other data don’t necessarily support these trends.
CFPB Director Richard Cordray testified Tuesday before the House Committee on Financial Services about the bureau’s semi-annual report to Congress, according to a transcript of his prepared testimony.
He noted that
July was the fifth anniversary of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the four-year anniversary of the CFPB’s launch.
Cordray highlighted how it is the regulator’s
primary responsibility to protect consumers in the financial marketplace and make sure they are fairly treated.
“Through fair rules, consistent oversight, appropriate enforcement of the law and broad-based consumer engagement, the Consumer Bureau is working to restore people’s trust and confidence in the markets they use for everyday financial products and services,” the prepared statement said.
Cordray cited the latest
Home Mortgage Disclosure Act data, which he indicated showed that owner-occupied home purchase financing was up more than four percent in 2014 — the first year of the CFPB’s new mortgage rules.
However, based on the latest economic data provided by Fannie Mae, Freddie Mac and the Mortgage Bankers Association — purchase mortgage production declined 11 percent between 2013 and 2014 to an average estimate of $676 billion. The data from the three entities doesn’t distinguish between owner- and non-owner-occupied activity.
“The upward trend appears to have accelerated over the first half of this year,” Cordray stated.
The bump in 2015 activity cited by Cordray corresponds to Fannie’s, Freddie’s and MBA’s data — which indicate an average of $369 billion in first-half 2015 home purchase originations, a pace that would have full-year 2015 purchase financing rising an average of nine percent over 2014.
Cordray said that the degree of mortgage industry consolidation was nowhere near the decline some had predicted.
“In fact, after taking merger activity into account, the number of lenders that reported having originated mortgages showed an increase in 2014,”
he explained.
Data from the
Conference of State Bank Supervisors indicate that the number of state-licensed mortgage companies registered in the Nationwide Mortgage Licensing System declined to 16,022 at the end of 2014 from 16,145 as of year-end 2013.
As of June 30, 2015, the number had tumbled to 15,577.
The CFPB chief also highlighted how the number of small financial institutions in mortgage lending has expanded.
“And in particular, after adjusting for consolidations, the number of community banks and credit unions that originated home-purchase mortgages last year was up from the year before,”
he said.
But the number of NMLS-registered
financial institutions was down to 10,566 as of Dec. 31, 2014, from 10,845 one year earlier.
The count as of mid-year 2015 was just 10,149.
Cordray explained that credit standards have eased lately.
This is supported by the Mortgage Bankers Association’s
Mortgage Credit Availability Index, which rose from 110.9 at the end of 2013 to 115.7 at the end of last year. As of August 2015, the index stood at 126.1.
“Consumers appear to be carrying their debt burdens more effectively, which has contributed to the fact that the delinquency rate in each of these markets is at or near record lows,” Cordray added.
By most measures, residential delinquency has been on the decline. Black Knight Financial Services reported that 30-day delinquency was 4.83 percent as of Aug. 31. While that was 12 basis points worse than the previous month, it’s still a historically low level and 107 BPS better than a year earlier.
Cordray touted more than 700,000 consumer complaints that have been handled by the CFPB.
The regulator recently released a report that showed overall average monthly complaints against all financial services companies during the three months ended Aug. 31 were up 16 percent from a year prior.
Mortgage complaints, however, were up just seven percent during the same period.
But the volume of complaints is a poor measure of problems in the industry, according to MBA President and Chief Executive Officer David H. Stevens.
During an interview Monday on
the Lykken On Lending show, Stevens criticized the irresponsible way that reported complaints are being used in news stories.
“It’s completely unqualified,”
Stevens said of the database. “Complaints, at length, now with narratives, from consumers who are saying they got dealt a bad hand either on the servicing side or the origination side … without validation.
“It lacks complete credibility from my perspective, and it’s something that now is being used as evidence in other stories about how our industry is operating. It certainly is not doing anything to help create confidence in the marketplace.”
